Helios and Matheson (HMNY) Fallout: Stock Crashes as Wall Street Debates Future


If you think things could not get worse for Helios and Matheson (NASDAQ:HMNY) stock, think again. With its shares worth pennies, the troubled owner of MoviePass (all-you-can-eat movie-watching buffet) tumbled another 60% today. At this point, HMNY investors aren’t quite sure whether to cry or laugh.

Helios and Matheson, which owns 92% of MoviePass, is attempting to right a loss-leader business model that enables MoviePass subscribers access to one theatrical screening daily for a $9.95 monthly fee. Unfortunately, the movie ticket platform continues to be a fiscal nightmare to HMNY’s liquidity. With MoviePass selling monthly memberships for a mere $9.95, movie theaters still selling tickets for an average of $9.16 per flick, and still paying full freight on as many as 30 tickets per month for each of its subscribers, MoviePass struggles to turn anything close to a profit.

Adding her two cents to the discussion is Maxim analyst Allen Klee: “We remain bullish on HMNY’s long-term outlook should the company successfully address its capital needs. HMNY represents a high risk/reward investment in our view, where the company faces near-term challenges including requiring significant capital raises. Longer term, assuming the company is able to raise capital, we think HMNY can provide a valuable and profitable service to cinemas and movie producers based on its scale and ability to drive traffic. We note other companies like Netflix have been very successful with flat monthly pricing plans and have been afforded high valuations in the market despite a lack of profitability (NFLX trades at around 10x 2018 consensus sales estimates). In contrast, HMNY stock currently trades at 0.1x our 2018 sales estimate of $439 million. If the company raises adequate capital, we believe it can reach profitability by 2020, and post 10% operating margins, longer term.”

Due to the need for significant additional capital, Maxim analyst Allen Klee is assuming coverage of HMNY stock with a Hold rating. (To watch Klee’s track record, click here)

Like many, top blogger Bill Maurer (ranked #15 out of 6,576 bloggers on TipRanks) remains bearish on HMNY, noting: “Investors shouldn’t try to catch a falling knife, especially one that has already reached terminal velocity. Helios and Matheson shares are down another 50% today, and we’ll likely see the losses get even worse until the financial situation is clarified. MoviePass needed money just to continue operating last week, and the inability to use the service for the summer’s newest hit movie will not sit well with customers. Shares will likely trade well below a dollar in the coming days, forcing a delisting notice to be sent, and then we’ll see another reverse split coming to allow the stock to continue trading. We saw how that worked out last week.” (To watch Maurer’s stock picks, click here)

 

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